Commodities witnessed an interesting end to a decade in 2020, which was for the most part unfriendly for the resourcessector. Investors brace for a new commodity supercycle in 2021 as globaleconomic recovery and reflation trades are set to play out strong. Industrial metals such as copper and silver are likely to outshine gold and crude oil prices.
Copper and Silver Outlook
“The year 2021 is likely to see an extension to the structural shift in commodities, driven by two mainnarratives; China’s quick post-pandemic economic turnaround and the global reflation play. Reflation theory refers to an expansion in the level of economic output by fiscal or monetary support offered by governments.”
“Silver has wider applications in the industrial sector as it is also seen as the next best hedge against inflation after gold. Therefore, if a potentialvaccine, as well as stimulus-driven globaleconomic recovery, materializes, the white metal could see a strong revival in demand for industrial applications.”
“Gold prices are likely to remain supported by the continuance of massive fiscal and monetarystimulus globally and higher inflation prospects. However, the extent of the rise may not match that seen in 2020, as governmentscould hold back on rolling out additional stimulus should the vaccine-driven economic turnaround gain momentum.”
“An unprecedented move towards copper-intensive renewable electricity wind power generationprojects by the US and the dragon nation has bolstered the demand for copper. A rally towards the $10K level cannot be ruled out on an acceptance above $8000.”
“Crude oil prices are likely to see an evenly balanced 2021, with the first half coming in as a struggle for the buyers to sustain the recovery. With travel, tourism and hospitality likely to take a few years to return to pre-pandemic normality, the room for additionalupside in oil remains limited. Even so, the vaccine-driven optimism about an economic recovery and stimulus measures could likely keep a floor under the prices.”